Foreign Relations of the United States, 1964–1968, Volume XVII, Eastern Europe

117. Memorandum of Conversation¹

Washington, June 9, 1964, 11:30 a.m.

SUBJECT

• Polish-United States Economic Relations

PARTICIPANTS

• US
  • The Secretary
  • EE—Richard W. Tims
• Poland
  • Edward Drozniak, Ambassador of Poland
  • Dr. Marian Dobrosielski, Counselor of the Polish Embassy

Following a discussion of Poland’s role in the Laotian crisis,² the Secretary turned to US-Polish bilateral relations and specifically raised the question of the Polish Government’s inaction, to date, on its prewar indebtedness to American bondholders. This matter was previously mentioned by Under Secretary Ball in a talk here with Polish Deputy Foreign Trade Minister Modrzewski last January,³ and the Secretary expressed the hope to Ambassador Drozniak that, now that the Most-Favored-Nation issue had been favorably settled,⁴ the Polish Government could make progress on the troublesome question of bondholders’ claims and get it out of the way. The Ambassador replied that he indeed would take the matter up upon returning to Warsaw this week. He added that Polish export sales in the US had suffered last year, affecting Poland’s ability to pay, and that they wanted to be more sure of this ability before undertaking an obligation to the bondholders.

The Secretary asked whether Polish trade here had not recently begun to take an upward trend again and whether tourism had not increased, remarking that the latter seemed one of the best ways for Poland to increase its dollar earnings. The Ambassador replied that they had some hope of increased trade here this year and that the tourist outlook was indeed better than last year, partly because of an improved political situation in the world. He pointed out, however, that Poland was handicapped in offering adequate tourist facilities, being a war-damaged country with many other pressing economic priorities. The Secretary said he would make a purely personal comment on this. American tourists like comfortable lodging while abroad, and in ministering to this taste our hotel chains have constituted a stimulus to tourism around the world. As an example, the Hilton chain has contributed managerial services under arrangements with local hotels in various countries. Would such arrangements be incompatible with the socialist system? Would they not rather be a very practical kind of marriage between capitalism and socialism, noninjurious to either side? The Ambassador smilingly replied that the proposed Hilton hotel in Budapest seemed to offer the answer, and that he would seek further comments on this subject while in Warsaw. He added that his Government had even considered building a Coca Cola plant.

Ambassador Drozniak went on to comment that US-Polish bilateral economic relations were confronted by no major difficulties at present but that there were certain remaining obstacles, including the Battle Act and the Johnson Act.⁵ He inquired whether there was any prospect of the latter being amended. The Secretary replied that this was in the realm of speculation and would depend on the coming elections as well as other factors; there was no possibility of such legislation being amended in the present session of Congress, and he could not answer for the next session. The Senate Foreign Relations Committee was studying these and related questions of our foreign trade, and there was interest also on the part of private groups. He felt he could express mild optimism.

In conclusion Ambassador Drozniak mentioned his government’s hope of negotiating another PL-480 agreement with the US next fall, and said he had been gratified in discussing this with Assistant Secretary Tyler to find that the latter saw no obstacle to US consideration of a Polish proposal along this line early in the fall, since that would be the most propitious time from the viewpoint of Poland’s planning requirements. The Secretary replied that he knew of no reason why Poland could not raise the matter with us at that time.

1. Source: Department of State, Secretary’s Memoranda of Conversation: Lot 65 D 330. Limited Official Use. Drafted by Tims and approved in S on June 16.
2. The memorandum of this portion of the conversation, transmitted in Unsec 30 to Warsaw, June 9, is ibid., Central Files, POL POL–US.
3. See Document 116.
4. On March 26, President Johnson directed Secretary Rusk to report to Congress that Poland’s MFN status would be continued under the provisions of the Trade Expansion Act of 1962. For text of the President’s memorandum and statement, see Department of State Bulletin, April 20, 1964, pp. 626–628.
5. For text of the Battle Act, the Mutual Defense Assistance Control Act of 1951, P.L. 218, see 65 Stat. 644. The Johnson Debt Default Act, signed April 13, 1934, prohibited financial transactions with any foreign government in default of its obligations to the United States. (48 Stat. 574) It was amended on July 31, 1945, to exempt foreign governments that were members of both the International Monetary Fund and the International Bank for Reconstruction and Development from some of its provisions. (59 Stat. 516)